Heating up the already litigious credit card climate, the Discover card program has filed a trademark infringement suit against American Express Co.
Discover's owners say their rights to the term "cash back bonus" were violated when American Express introduced a product in August called the Cash Back Card.
Discover, a unit of Morgan Stanley Dean Witter & Co., further accuses American Express of misrepresenting Discover's products in promotional materials.
The suit, filed Nov. 24 in U.S. District Court for the Southern District of New York, seeks to stop American Express from offering any product using the term "cash back." It does not specify financial damages.
"We feel that we made an enormous financial investment in the cash back trademark, (which is) the defining quality and advantage of the Discover card," said Beth Metzler, a spokeswoman for the Riverwoods, Ill.-based unit.
American Express "offers a cash rebate program similar to what's offered by Discover card," Ms. Metzler said. "We believe the use of 'Cash Back Card' will dilute the value of our cash back bonus trademark and cause consumers to be confused."
Discover said it has owned "cash back bonus" since 1989, three years after the Discover program began as a venture of Sears, Roebuck and Co.
Gail Wasserman, an American Express spokeswoman, said her company is reviewing the complaint and had no response to it.
In marketing material, American Express said its Cash Back Card offers "double" the cash back of Discover. Discover claimed that in most situations, its rebate is equal to or greater than American Express'.
Ms. Wasserman said a cardholder spending $2,000 in a year would earn $15 from her company and only $7.50 from Discover.
Discover counters that American Express customers would have to spend $8,000 before they could receive a rebate equal to Discover's. Two cash rebate cards, Discover and Private Issue, offer up to 1% and 2% cash rebates respectively, though Amex is not targeting the lesser-known Private Issue product in its marketing.
Even as these nonbank rivals are butting heads, they are on the same side of a different case: the Department of Justice's antitrust complaint against MasterCard and Visa. Both see that suit as opening the door to more marketing cooperation between them and banks.
Executives from the two nonbank issuers had discussed the trademark matter before the lawsuit was filed, but no out-of-court resolution could be reached.
Discover's complaint says American Express "had unlimited choice" in selecting a name for its card, but instead "acted in a willful, egregious way in choosing a name that mimics the (Discover) trademark."
Dennis Shea of Auriemma Consulting Group, Westbury, N.Y. said he could understand American Express' strategy because "cash back cards are the most desirable cards offered."